“Free Markets and “Free Trade” = Elite Propaganda” – Part II

Historically, whether you were anything from a rich merchant to a poor day labourer it was obviously not in your personal interest to allow others free access to your markets to offer the goods or services at a lower price or to work for lower wages. The merchant might be driven to bankruptcy by competition, the labourer from his job. History also tells us that whatever their previous economic station, such people will probably not be able to find equivalent or better paid employment and often may not be able to find any employment at all where structural unemployment arises. What was historically true not only remains true today, but its effect is much magnified because the opportunities for competition are greatly increased by modern communications and the ease of travel and cargo transportation.

Of course, any individual or sectional advantage causes strains in a society and if the material privilege of any person or group becomes excessive, sooner or later there will be a successful revolt and the wealth in a society will either be shared more fairly through a change in the way the society is structured, for example, through the abolition of tolls, the ending of state monopolies or even through a removal of the rich as a class without any increase in the wealth of the majority.

But wherever wealth distribution through social change has occurred it has normally been done with the express intention of benefiting a particular group or even an individual in the case of monarchs. The odd thing about “free marketeers” is that what they ostensibly advocate is not to privilege any particular individual or group but to benefit society as a whole. Whether free markets do so is another matter, but that is their claim.

The “free marketeer” says to a population, do what I say and in time society will become richer. He does not say this person or that group will become richer or even all will become richer, but merely that the society as a whole will become richer. This is an extraordinary thing to ask people to trust in. It is also the most wonderful blank cheque ever written to a politician because not only does it absolve him or her of any need to take the responsibility for regulating the economy, it also means that he or she can never be held to account for dishonesty by any individual if that individual is personally worse off. All a “free marketeer” politician has ever claimed is that his economic way will make society richer. Provided society overall is richer, he has met his met his promise.

It is also telling for their intellectual credibility and honesty that “free marketeers” will oppose government interference in such matters as subsidies, quotas, embargoes, wage rates and working hours and grumble about tax rates and public expenditure, but are generally quite happy to see other gross distortions of the market deriving from government action. They not only tolerate patents, copyright and trademarks, but often defend them as property in themselves and as devices which actually improve economic performance because they encourage invention, investment and expansion. In addition, those who constantly bleat about Adam Smith’s “invisible hand” sorting out the business wheat from the chaff insist that limited liability is necessary. This of course is also a violent interference with the market because it means that the individual shareholder never takes full responsibility for their investment. (It is worth noting that the British industrial revolution – the one and only bootstrapped industrial revolution – took place before limited liability became legally possible (Limited Companies Act 1862) and at a time when patent rights were insecure and in practice limited to the domestic British market.)

It is true that none of these things are actually part of what the concept of a “free market” is and that they are inimical to such a market, but the fact that almost all modern “free marketeers” have tacitly incorporated them into their vision of what a “free market” is demonstrates their intellectual confusion (or dishonesty if you prefer).

3. The “free market” as its proponents conceive it

Let us put aside for the moment the fact that “free markets” are state regulated markets and ask the question what is a “free market” as it is conceived by “free marketeers”? A jolly good question. Even if market distortions which appear acceptable to “free marketeers” such as patents and limited liability did not exist, that would leave many other things which prevent unfettered domestic competition. In an advanced modern economy these include:

Taxes

Non tax fiscal measures, for example, control of interest rates

The state of the currency

Exchange controls

Overall Government expenditure

State Subsidies

Industry and trading standards, official and otherwise

Public sector employment

Transport costs

Public ownership

Defence

Direct and indirect Government intervention

Copyright, trademarks and patents

The moral and social climate, for example, a tradition of Welfare or the feeling of the people, for example, the national feeling of Japanese Practical cultural barriers such as the difficulty of a language

Dumping

Transport costs

Working hours

Trading laws

Labour laws

Wage rates

Bureaucratic differences

Company laws – particularly the attitude towards foreign ownership

Banking laws

Banking system

Social policy – welfare, health and so on

Physical infrastructure

Honesty of public servants

Foreign policy

National strategic considerations

Education – The amount spent, school leaving age, curriculum,

Limited Liability

Environmental laws

Some of these things such as subsidies, patents, quotas and limited liability could be obviously and legitimately ruled out of order by a “free marketeer” because they are deliberate state interferences with competition, but what of items such as the provision by the state of education or the physical infrastructure of a country? They are undeniably distortions of competition at some level, but they are not deliberate attempts by the state to distort competition. A purist “free marketeer” could just about say such things were no business of the state and still be intellectually coherent because it is possible to conceive of a society without such state provision. But however purist they might be, sooner or later the “free marketeer” will run into features which undeniably restrict competition but which must exist simply because they are an inescapable part of society. The most obvious is tax.

Any modern state needs a large tax revenue to sustain itself, the only questions to determine being how large should be the revenue and what it should be spent on? Some things such as defence and policing are inescapable expenditures for any state, although even there the amounts to be spent are debatable and elastic. Items such as education and welfare are more subject to variable expenditure. Nonetheless, substantial amounts are as a matter of contingent fact invariably spent on such items by all advanced states. Such countries also engage to a lesser or greater degree in all the forms of regulation listed above.

In theory, and even more in practice, the notion of a “free market” seems to rest on little more than anti-monopoly laws, wages and prices set by the market (although in practice this does not happen purely through the market because of welfare provision, tax regimes etc) and a lack (or at least a minimum) of state interference in such areas as health and safety, employment law and company law.

The inclusion of these narrow criteria are merely a subjective choice made from a much larger menu of man-made distortions of the market. Consequently, there is no objective coherence to the concept of the “free market” as it is conceived by the “free marketeers”. It is an arbitrary ideology based on subjective choice.

7 Comments

t g spokes
on August 15, 2018 at 10:28 am

Legally attested consortia,or trusts or even groups often based purely on trust were used foe example “When our boat comes in ” hundreds if not thousands of years earlier. The Companies Act merely made understanding available to all and cut legal chicanery.

However a fascinating,andto me, a totally new view ( I’m sorry to think ) of Civil Service polished think. But certainly fascinating.

t g spokes
on August 11, 2018 at 5:56 pm

I thoughtwe we advocated Free Trade not free markets. All markets have to have rules otherwise you can’t market.

This is an important article and must be thought about. But did it have to be so long and inclusive ( I suppose Civil Service Training. Eh ? )

So many questions. Would you rather work for an elite person, or a thug. irrespective of what he’s elite at. And anyway what’s wrong with having an elite. Elites of elites of elites could be god like.

There are years of arguement in this article. Why bother ? Let’s start a bit further along.

The difference between a free market and a non-free one is whether the rules are voluntarily agreed by its participants or imposed by a non-participating entity (usually a government or another protection racketeer).

The article is far too long (7 parts now, or is it 8?) and every subsequent part builds on the previous one, but every last one starts from basic assumptions which are completely wrong and makes more wrong ones.

E.g. the first part assumed that “free markets” were regulated non-monopolistic markets, which is as false as can be.
This one further assumes that free marketeers support government-granted monopolies like patents, which is also fundamentally false. Free marketeers of course favour voluntary limited liability clauses in contracts but not limited liability companies created by the government, so that assumption is also false.

Of course everyone (person A) would be better off if they could do what they (i.e. person A) wanted, and everyone else could also only do what they (i.e. person A) wanted, i.e. if A was the master of all. I don’t see this as an argument in favour of allowing some A’s this power (e.g. giving them the power to stop some people competing with them by the use of force).

It is obvious that free markets are the optimal system for everyone’s prosperity. Any departure from a free market prohibits some voluntary exchange, and every voluntary exchange benefits both parties to it, or they wouldn’t engage in it – that’s why it’s called a voluntary exchange. Therefore, the effect of restricting the free market is to forbid beneficial voluntary exchanges, which must impoverish all the parties to the forbidden exchange. Ergo, any restriction imposed on a free market impoverishes people.

Obviously it doesn’t impoverish everyone – in the same way as a robber putting a gun to your head does not impoverish everyone, i.e. it doesn’t impoverish the robber. Interference in a free market does not impoverish those who interfere in it, but such interference action is the same as that of the robber.

This article is one long long-winded straw man argument, full of wrong assumptions and therefore wrong conclusions.

It’s only allowed to happen because cheap people, often high earners themselves, are too selfish or stupid to accept the long term damage caused by short term greed.

Jim Makin
on August 11, 2018 at 11:16 am

What you seem to be saying is that the government (in collusion with others) says one thing and does another . . . so what’s new?

If we didn’t have the concept of a free market, how could we discuss the many distortions (as you rightly say) that governments all over inflict upon us?

The reason free markets don’t fully exist is because governments love a monopoly and will crony up to private enterprise to create them for their own purposes under the banner “for our own good”. So with education, the NHS, etc. Thank God they didn’t continue to control the food market after the war.

Free markets are also “invented” by people when the official government-approved market fails – so we get a “black market”. The truth is that markets will out – they are not an arbitrary subjective invention.

Jake Bennett
on August 11, 2018 at 10:34 am

“Consequently, there is no objective coherence to the concept of the “free market” as it is conceived by the “free marketeers”. It is an arbitrary ideology based on subjective choice”.

One gets the feeling that the so called global economic model put together under the rallying banner of ‘free markets deliver prosperity to all’ has really been put together to further the interests of big government and corporations as well as a whole host of economic and social global bodies, who all no doubt, can agree that the nation state is an outdated concept.

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